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Embraer (ERJ) Misses Q4 Earnings Estimates, Offers View

Embraer SAERJ reported fourth-quarter 2015 adjusted earnings of 16 cents per American Depository Share (ADS), widely missing the Zacks Consensus Estimate of 75 cents by 78.7%. Quarterly earnings also plunged 77.5% from 71 cents per ADS reported a year ago.

The company's 2015 earnings of $1.48 per ADS were 33.9% lower than the prior-year figure.

Total Revenue

In the fourth quarter, Embraer posted total revenue of $2,074.4 million, surpassing the Zacks Consensus Estimate of $2,027 million by 2.3%. Reported revenues also inched up 1.4% year over year.

Full-year revenues, however, came in at $5,928.1 million in 2015, down 5.7% from $6,288.8 million reported a year ago due to lower contribution from the Defense & Security segment. Also, higher revenues from Commercial Aviation (up 5.9%) and Executive Jets (up 8%) were overshadowed by lower contributions from Defense & Security (down 44.3%).

Order and Delivery

The company delivered a total of 78 jets in the fourth quarter, down 4.9% year over year. Total deliveries in 2015 were 221, up 6.3% year over year.

Deliveries in the commercial aviation and business aviation markets were a respective 33 and 45 jets in the fourth quarter, and 101 and 120 jets in 2015. In comparison, the company had delivered 30 and 52 jets in the commercial aviation and the business aviation markets, respectively, in the fourth quarter of 2014, and 92 and 116 jets in 2014.

Under commercial aviation, Embraer supplied 2 E170s, 20 E175s, 5 E190s and 6 E195 in the fourth quarter of 2015, and 2 E170s, 82 E175s, 8 E190s and 9 E195 in 2015. The rest, which included 25 light and 20 large jets in the fourth quarter, and 82 light and 38 large in 2015, were delivered to business aviation.

Embraer had an order backlog of $22.5 billion, as of Dec 31, 2015. Although this represents a 1.3% sequential decrease, it reflects 7.7% year-over-year growth.

Operational Highlights

In the quarter under review, Embraer's cost of sales and services was $1,724.7 million, up from $1,691.2 million a year ago.

The company's gross profit decreased 1.3% to $349.7 million in the fourth quarter.

The company reported quarterly earnings before interest, taxes, depreciation and amortization ("EBITDA") of $163.6 million, down from $281.3 million in the prior-year quarter.

Income tax expenses in the quarter were $48.3 million compared with benefits of $54.9 million a year ago.

Financial Update

Cash and cash equivalents were $2,165.5 million, as of Dec 31, 2015, compared with $1,713 million as of Dec 31, 2014.

As of Dec 31, 2015, the company's non-recourse and recourse debts were $374.7 million, down from $389.7 million as of Dec 31, 2014.

In the fourth quarter, net cash from operating activities was $871.7 million, up from $506.6 million a year ago.

In 2015, the company's capital expenditure was around $188.0 million, while free cash flow was $177.8 million. Free cash flow in 2014 was a negative $403.6 million.

Guidance

Embraer expects 2016 revenues in the range of $6.0-$6.4 billion. Defense & Security revenues are expected to remain within the $700-$750 million band.

The company expects to deliver 105-110 jets in Commercial Aviation and 40-50 large jets and 75-85 light jets in Executive Jets.

It expects EBIT margin in the range of 8-8.5%, with EBITDA margin of 13.3-13.7%.

For 2015, the company plans to invest $650 million, including capital expenditure of $275 million.

Other Releases in the Sector

Lockheed Martin Corp. LMT reported quarterly earnings of $3.01 per share, comfortably surpassing the Zacks Consensus Estimate of $2.93 by 2.7%. Earnings, however, came in line with the year-ago level. Full-year earnings came in at $11.46 per share, beating the Street expectations of $11.38 by 0.7% and improving 2.2% year over year.

The Boeing Co. BA delivered fourth-quarter 2015 adjusted earnings of $1.60 per share, beating the Zacks Consensus Estimate of $1.25 by 28%. Earnings, however, plunged 30.7% from $2.31 per share a year ago owing to the previously announced $569 million after-tax charge (84 cents per share) on the 747 program due to production cuts, given the slow recovery in the air cargo market. Full-year non-GAAP earnings were $7.72 per share, surpassing the Zacks Consensus Estimate of $7.35 but decreasing 10% year over year. On a GAAP basis, earnings were $7.44 per share, up 1% year over year.

Textron Inc. TXT reported fourth-quarter 2015 earnings from continuing operations of 81 cents per share, missing the Zacks Consensus Estimate of 83 cents by 2.4%. However, the figure increased 2.5% from 79 cents per share reported in the year-ago quarter. Full-year earnings came in at $2.50 per share, missing the Zacks Consensus Estimate by 0.8%. However, 2015 earnings were higher than the year-ago number by 17.4%.

Zacks Rank

Embraer currently has a Zacks Rank #3 (Hold).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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